Jeffrey Gundlach: Long Energy Stocks & Short Facebook

He is long on the SPDR S&P Oil and Gas Exploration and Production ETF (XOP)

Crude oil rally has not been captured in major energy stocks and that some energy stocks have significant potential to run in the near future

“It’s not a very great performing sector, and yet oil has gone up towards $70 a barrel”

“If you look historically at the energy sector versus the S&P 500, not surprisingly it’s correlated with movements in oil. That hasn’t happened this time, and I think there’s a catch-up there. The charts look good on XOP, the exploration and production part of the sector”

US crude oil inventories are below their 5-year average; the limitation in the US pipeline capacity could support the US crude oil output

According to a report by the IEA, crude oil demand is expected to be higher than its supply in 2018. However, geopolitical issues such as the April 14 US missile strikes on Syria pushed up crude prices

WTI rose 12% on a YTD basis (as of April 24); SPDR Oil and Gas Exploration and Production ETF rose 4.1% on a YTD basis

Historically when you go into late economic cycle and particularly when you start getting closer to a recession, what a lot of people don’t understand is commodities actually go up a lot – every time going back to 1972

Shorting Facebook Could be Profitable

“Nothing new ever occurs in the business of speculating. What’s happened in the past will happen again and again and again. There’s good and bad going on in the world. Interpretations matter”

Facebook’s recent data breach issue has diminished its perception among consumers and investors

I saw the congressional testimony, which I thought was terrible, dismissive and insincere

I also think there’s never one cockroach in the kitchen

When they started regulating biotech companies, for example, the stock just started tanking; Facebook dropped, it has not tanked

There is going to be a lot of turbulence in the air for this flight

A 3% Yield is a Crucial Mark for the Fed and Market

3% yield would be an important mark for the central bank in its rate hike process

The 10-year Treasury yield (BND) has risen 29.3% in the past year, and it crossed the 3% mark for the first time in 4 years on April 25

The stronger rise in yields indicates that the Fed believes that the economy is growing at solid pace and that inflation is expected to rise at a faster rate

The rise in crude oil prices and commodity prices signals that inflation could also move at a faster rate

As the 10-year yield is a key benchmark for the financial markets and borrowing costs, it’s important for investors to track yield movements